Brexit – new opportunities for Anglo-Indian trade and economic success
Following the referendum vote on 23 June, we have seen a number of severe reactions to both the vote and other political changes from the stock and currency markets, many of which have been short-lived. However, the real, underlying UK economy has continued to thrive. The ambitious, fast-growing companies that we work with have continued to focus on growth and investment albeit with a weathered eye on changes and trends around them, ensuring that they have evaluated downside risk carefully. Foreign Direct Investment (FDI) has continued into London and other parts of the UK, although everyone is watching how things may change.
Throughout this time we have seen positive indices from business and general economic data paint a picture of a healthy economy, with some moments of doubt thrown in for good measure. We have to bear in mind that nothing has yet happened – we are still a full member of the EU and have access to the single market - the future will be very different, though.
The opportunities for UK business to raise their collective sights and look to other markets across the globe following our exit from the EU are huge.
According to a new report by BDO LLP(UK) in association with the Institution of Mechanical Engineers (IMechE) - internationalisation is central to the strategy of 44% of the businesses surveyed with over one third (39%) saying they will target markets outside of the EU as a result of the Brexit vote. While not a majority, this is a substantial number given the costs and workload involved for any business in establishing foreign markets.
Long before the Brexit referendum, global trading patterns were showing movement eastwards towards Asia. I have long been a believer in building on our economic links with our fellow Commonwealth countries and Brexit will give us the opportunity to accelerate this, since we will be unshackled from the restrictions placed upon us by the EU collective trade rules. Seeing the focus on India by our new Prime Minister and her cabinet is very positive and shows that they are focussing their attention to the greatest opportunities for mutual success in the post-Brexit world.
Once we are through the Article 50 exit process and no longer a member of the EU, we will be free to negotiate our own trade deals with non-EU countries such as India (and other Commonwealth nations) which offers our businesses a massive, growing, successful market for the future and better access to the young talent that Indian universities are developing. The big question will be just how quickly we can sign up these new trade deals once we leave the EU – the risk for the UK economy being in a hiatus between the two is real.
Doing business in the UK
The UK has a fiscal system designed to encourage business, both in the UK and cross-border. We have the lowest corporation tax rate in the G7, the lowest social security costs in Europe and business-friendly labour laws. We have the most sophisticated capital markets in the world and world-class advisors to support businesses. Even if we sit on the edge of the European single market and not within it, the benefits of investing in the UK far outweigh the immaterial addition burdens that trade tariffs and customs duties between the UK and the 27 EU member states may bring. However, from my discussions with those other EU member states, it is clear that many see the maintenance of our trading relationships to be key – maybe the hard rhetoric we are seeing from some of the larger EU economies will be tempered by their fellow EU-27 members keen to benefit from trade with the UK (all of whom have equal rights to veto any UK deal).
The UK and India have always been strong trading partners and it is now time for us all to benefit from our long trading history for the good of both economies. The sooner our governments can sign a long term trade deal the better it will be for both countries. #ukisopen
Stuart is the Head of BDO's Brexit Taskforce.